Whether the weather be fine, Or whether the weather be not,
Whether the weather be cold, Or whether the weather be hot,
We'll weather the weather, Whatever the weather,
Whether we like it or not!
We take weather seriously here at Aston Currency and it is necessary to remember that our American cousins are suffering on a number of fronts, not least because today is the 16th anniversary of 9/11. Wild fires are raging across the West and the Southern States have had to bear the brunt of Harvey, the record breaking and ferocious Irma and they still have Jose and Katia to come. The devastation is incomparable and almost absolute in certain areas of the Caribbean. The only positive to draw from any of it is that the storm winds are actually clearing the smoke as they blow across the country.
In other news, there was no missile test/launch on the 69th anniversary of North Korea’s National Founding Day, as anticipated. Instead Kim Jong Un hosted a massive celebration to congratulate his nuclear scientists and technicians instead, whilst facing significantly increased sanctions and predictably suggesting his own reprisals. Clearly he was happy with his shiny peanut, despite the fact he couldn’t eat it.
GBP begins the week making gains on USD and EUR but it may not last for long.
Cable has seen an embattled GBP work hard to take advantage of hints for a softer Brexit against the misery of the US’s extreme weather. Data from the UK last week reported that the trade deficit is narrowing and PMIs are on target. The upcoming week features top-tier inflation (Tuesday a.m.) and jobs indicators (Wednesday a.m.), as well as the BOE decision on Thursday for interest rates. Even with signs of an economic slowdown, there may be hints for the BOE raising rates despite the still-high inflation and the booming credit market. The Monetary Policy Committee probably prefers a higher exchange rate to lower inflation but possibly won’t accompany this desire with an interest rate increase. All of this will be followed up on Friday with the BOE Quarterly Bulletin, detailing monetary policy operations and current market conditions.
The UK economy may not be looking its best but GBP will likely remain resilient against a weaker USD caused by very bad weather, unfortunate politics and continuing uncertainty from Korea. Buying USD from Sterling? Try and take advantage of any change in the strength of GBP through utilising market orders. You can contact the trading team to implement these.
GBP/USD movement can be seen on the graph below:
GBP/USD 1 Week
This week there will be focus on GBP with a deluge of data out of the UK. Inflation is expected to tick back up to 2.8%. The unemployment rate is expected to remain on hold at the historic lows of 4.4% with earnings also creeping up to 2.3% (including bonuses). On Thursday the central bank should keep policy on hold and voting is expected to show a 6-2 split in favour of keeping rates unchanged. Overall, we could see Sterling continue to edge higher this week, however, the key parliamentary vote on the Brexit bill today could cause some volatility. Parliament is expected to vote in favour of the bill but a vote against would continue to add to the uncertainty of Brexit and further undermine GBP value. Clients selling Sterling should cover a portion at the current levels with orders to the upside for the coming weeks.
GBP/EUR movement can be seen on the graph below:
GBP/EUR 1 Week
Draghi’s comments at the ECB avoided the decision on Quantative Easing (QE) last Thursday announcing only “preliminary discussions”, meaning we are likely to now see QE tapering in October. Having blamed the strong EUR for almost everything that could go wrong for Europe but the weather, the markets were unconvinced and EUR got even stronger. With large swathes of the US either on fire or underwater, worries about the hurricanes, wildfires, the retirement of the Fed’s Vice Chairman Stanley Fischer and lower US bond yields all contributed towards depressing USD.
Euro movement against the Dollar can be seen on the graph below:
EUR/USD 1 Week
Not trading your currency is still a risk. The markets will move, volatility and relative values will vary but whatever your foreign currency exchange and international payment needs, you can rely on the team here at Aston Currency Management. Please do not hesitate to get in touch with us, we look forward to hearing from you. Now, if you will excuse me, I am heading to the paddle store to stock up before any of you get to the proverbial creek. Have a great week.
Written by Damien Lipman